Ladies and gentlemen, good day and welcome to the Q3 and Nine months FY 2026 Post-Results Conference Call of Dhanuka Agritech Ltd, hosted by Antique Stock Broking Ltd. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. I now hand the conference over to Mr. Riju Dalui from Antique Stock Broking Ltd. Thank you, and over to you, sir.
Thank you. Good afternoon, everyone. I'm pleased to host today's earnings call of Dhanuka Agritech. We have the leadership team represented by Mr. M. K. Dhanuka, Chairman, Mr. Rahul Dhanuka, Managing Director, Mr. Harsh Dhanuka, Executive Director, and Mr. V. K. Bansal, CFO, on the call. Without any delay, I would like to invite Mr. M. K. Dhanuka to start with opening comments, post which we will open the floor for Q&A. Thank you, and over to you, sir.
Thank you, Riju. Good afternoon, ladies and gentlemen. I'm M. K. Dhanuka, Chairman of Dhanuka Agritech Ltd. Welcome you all to the Q3 FY 2026 earnings call. I have with me Mr. Rahul Dhanuka, Managing Director, Mr. Harsh Dhanuka, Executive Director, and Mr. V. K. Bansal, CFO of the company. As you are aware, Dhanuka Agritech is a leading Indian agrochemical company. Dhanuka is working with a vision of transformation through agriculture. We have a pan-India presence in all major states to reach out to more than 10 million farmers with our products and services. Dhanuka's key focus has been on the introduction of novel chemistries and extensive product development, distinguishing us from the rest of the industry. Over the last couple of years, we have set up two research and technology centers to enhance our focus on innovation and research.
One of the centers is focused on applied chemistry and working for the establishment of new products and new formulation development. The second laboratory is focused on innovation in chemical synthesis for generic and late-stage patented products. To support our investment in innovation, we have significantly enhanced our regulatory team to speed up our Indian and international registration initiatives, providing us faster access to international markets and quicker introduction of new products. Dhanuka has international collaboration with 10 leading global agrochemical companies from Japan, the U.S., and Europe, which helps us to introduce the latest technology in India. With four manufacturing units and 41 warehouses across India, we cater to around 6,500 distributors and 80,000 retailers. Dhanuka has a strong sales and marketing team to promote and develop new products.
During this quarter, agrochemical demand remained weak due to stressed demand drivers, weather issues, and low crop prices leading to industry-wide volume decline. Farmer interest reduced in making investments in crop production chemicals due to lower crop prices. South and West India saw sharp demand declines, while East and North remained stable. Indian farmers delayed purchases due to significantly extended rainfall and weaker commodity realizations. Lower farm incomes reduced spending on crop production products, impacting domestic sales. Further, I'm happy to share that we have commercialized the second product from the Dahej plant in Q3 FY 2026. We are working for making the Dahej operations EBITDA positive in FY 2027 and trying to reach 80% capacity utilization of the existing plant. Also, we are in the final stages of working for the business plan for MPP2 and will be concluding the same within this year.
Now, moving on to the financial performance for the last quarter, our revenue from operations stood at INR 409.92 crore in Q3 FY 2025-2026 versus INR 445.27 crore in Q3 FY 2024-2025. EBITDA stood at INR 58.66 crore in Q3 FY 2025-2026 versus INR 75.56 crore in Q3 FY 2024-2025. Profit after tax stood at INR 40 crore in Q3 FY 2025-2026 versus INR 55.04 crore in Q3 of FY 2024-2025. FY 2025-2026, with two straight negative quarters, has been a blemish on an otherwise decent performance from Dhanuka over the years. I can assure the stakeholders that the bad phase is over now, and now in the future, it is going to be good only. I would like to assure our shareholders and our stakeholders that our strategy is well laid out with continuous extension in rural market penetration, new product introduction, technical manufacturing, and international market expansion. We are confident in delivering our long-term objective of achieving double-digit CAGR.
Zone-wise percentage share of turnover for Q3 FY 2025-2026: North India 25%, East India 11%, West India 30%, and South India 34%. Product category-wise percentage share of turnover for Q3 FY 2025-2026: Insecticides 28%, Fungicides 21%, Herbicides 37%, Others 14%. Dhanuka considers itself responsible towards securing the farmers' welfare and preserving food security of the nation. We continue to strengthen our association with the agriculture universities, [Foreign language] , and other critical institutions to impart knowledge and latest technology to the farmers. Thank you very much for your kind attention, and now we would like to open the forum to take the questions. Thank you.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Prashant Biyani from Elara Securities. Please go ahead.
Thank you for the opportunity. Sir, how is the current demand scenario for agrochemicals? While we understand Q3 was weak, how is Q4 doing, and what is your expectation from Kharif season?
Right. So, Q4 has really started well. January has done well for us. South India paddy, East India paddy is looking really good. Wheat crop has been good, and the relevant consumption of wheat herbicide has happened extending from late Q3 to early Q4. So, all that is looking bright. We are looking into a good harvest of Rabi and then getting into a good Kharif. Right now, it will be too early to kind of indicate anything for the upcoming Kharif. We would still be waiting for weather forecasts coming in late March and early April before we really firm up our Kharif plans.
Right. And sir, out of the total top line, how much is the contribution from technical sales and revenue from the molecules of Bayer that we had bought, both in Q3 as well as nine months?
You see, revenue from Bayer molecule in the balance sheet of Dhanuka is around INR 25 crore-INR 27 crore. Right?
Right.
With regard to the second part of your question, with regard to technical sales, this is around INR 50 crore.
Sir, I presume this will be for nine months. For the quarter, how much is it?
See, technical sale is not much in quarter three. It's hardly around INR 3 crore-INR 4 crore. With regard to this Bayer product, this was major in Q3. Yeah.
Sir, this INR 25 crore-INR 27 crore is all top line, or some of it is net economic benefit as well?
No, no. It is the top line. Net economic benefit is separate, which is around INR 6 crore in quarter three and overall is around INR 19.5 crore in nine months.
Sir, from here on, the net economic benefit will continue to flow, or it will stop?
No, no. It will definitely stop. The movement will take the entire control. The net economic benefit will definitely discontinue. So, from the next financial year, which is FY 2027, some of the export sale will start appearing in our balance sheet. And by the end of the financial year, I think we'll be controlling the overall revenue. Which means? In the year FY 2028, there should not be any net economic benefit. But yes, in the next financial year, net economic benefit would be there but significantly lower than the current year.
Right. And sir, next year, what could be the contribution from technicals as well as these two molecules of Bayer?
In Dahej balance sheet?
Yes.
You see, that is under process. We see the team is working with regard to the export sale. It is a little difficult to estimate. I think the progress is on. We will be able to assess in a better way by the end of March.
Even for technicals?
Technical sale would be sort of in line with this current year, maybe 10%-20% growth.
Sir, how much is the current cash on books?
Current? Cash on books.
Cash.
Cash and liquid investment. It's more than INR 250 crore.
Okay. And sir, just lastly, how much was the sale from biologicals in FY 2025, and how much was it for nine months 2026?
Sale in biologicals almost negligible in 2026, and in 2025, it was less than INR 2 crore.
Okay. Okay, sir. Thank you so much for your time.
Thank you.
Thank you. The next question is from the line of Saurabh Jain from HSBC. Please go ahead.
Thank you for the opportunity. Will it be possible to kind of indicate or quantify what could be the negative impact of sales returns for you in this quarter and the same number, say, last year?
You see, sales return this year is almost equal to last year but slightly lower than by INR 2 crore in Q3 as compared to the Q3 of the previous year.
Okay. So, sales returns have not really kind of increased for you in this quarter, and?
In this quarter, yes. That's right.
Okay. Understood. Correct me, biologics, you're saying there is no contribution for you in this quarter? I'm a bit confused on the biologics side. I thought it contributes almost 9%-10% of your revenue.
Biologicals? No. One is the PGR category. Biological is biostimulant, or you are saying biological?
No, I mean the products which are under regulatory challenges. What is that contribution?
Products under regulatory challenges, in this category, we were having a contribution of around 19%. But this year, the impact in our Q3 is around INR 15 crore, and nine months is the impact of INR 49 crore on account of the G4 product biostimulant stopped sale, basically.
Okay. You lost INR 50 crore of sales on the nine-month basis because of these regulatory challenges.
Yes. That's right. That's right.
How much of it is normalized now, and what should we expect on this side in the future on the regulatory issues?
So, the regulatory framework is in place, which is really good for the organized players like Dhanuka. So, our products are under testing and approval stage. We are quite hopeful that we'll be receiving our approvals by the end of this quarter, and we'll be up and running with a fresh set of biological offerings, biostimulants offering in the new regulated regime in Q1 of next year.
But are you confident that you will be able to get speedy approvals so that it kind of kicks off for you in the first quarter? I'm trying to get a sense of how much of business has already normalized, and what can be the expectations for FY 2027 on that side?
When you say how much of business has already normalized, I don't get that. But yes, we are tracking our approvals, and we are hopeful of getting approval for at least three of our products in this quarter so that we can launch by Q1 ending.
Okay. Understood. So, expecting that almost three out of four molecules, you will be expecting it to normalize in the first quarter onwards. Correct?
Yes.
Oh, understood. Thanks. And also, I wanted to seek your comments around the recent changes in the China policy when they're ending export rebates on some of the technicals of the generic molecules. So, what would be your view on that side? Does it make a problem for players like Dhanuka because some of our purchases are linked to China? How are you strategizing to kind of handle this issue in the industry?
Good question. So, you see, this is China's internal approach. This will certainly increase the price of some of the commodities for which export rebates have been reduced. Since it is an industry-wide phenomenon, it will not significantly impact either our sourcing or our competitive edge in the market. I don't see any material impact on our sourcing out here.
Okay. So, you would assume that industry will be able to pass on these hikes in India because I thought it becomes difficult and challenging to pass on the higher prices. And if it happens, it happens with a lag.
I will not comment about the industry here. At Dhanuka, we kind of significantly follow this practice of passing on the increased cost as much as possible downstream. We have mostly done it almost all past years and quarters, and we are pretty hopeful we'll be able to do that.
Okay. Possible to also tell us what is the revenue exposure that you would be having, which is linked to some of these products?
Actually, most of these products, glyphosinate, we are already buying from India. We are not sourcing from China. Glyphosate, the export benefit was already removed in the past year, so there will be no impact. The other products are not confirmed, which will have an impact.
Okay. Sure. Thanks. I'll get back in the queue.
Thank you. Ladies and gentlemen, if you wish to ask a question, you may press star and one. The next question is from the line of Riju Dalui from Antique Stock Broking. Please go ahead.
Hi, sir. Two clarifications in terms of when you said that the income from the Bayer is about INR 6 crore for this quarter. So, this is mainly the royalty income that you have mentioned, the INR 6 crore?
It is not royalty. It is net economic benefit. It's like royalty, not the royalty, actually.
Understood. Understood. The sales of the revenue that you have mentioned this year, maybe for the nine months, INR 25 crore-INR 27 crore. Earlier, you have indicated that the majority part of the revenue came from the domestic market. Is it still the domestic market contributing this revenue from the Bayer product, INR 25 crore-INR 27 crore, or some part of this revenue came from the outside of India?
No, no. It is from India only.
Okay. The recent transfer for the overseas market, so when you can expect that, and how is the timeline that are moving?
It is in process for various countries, and many of the applications are in process. So, in 2027, sorry, in 2026, we will see a lot of transfers happening. Even without the registration, transfers, the sales will begin once the distribution appointment gets completed and the sales move to the distributors, Dhanuka distributors.
Understood. So, for the overseas business, we can expect the transfer or the revenue under Dhanuka's book might happen from the Q1 or Q2 of 2027, right?
Yeah. Q1, surely.
Understood. In terms of the guidance, if I look at your nine-month numbers, and you have mentioned in the PPT that we have maintained the guidance, what we have earlier communicated. If we look at in terms of run rate, our margins in terms of EBITDA is roughly around 18% as of nine months. If I look at last year Q4 numbers, there was one-off impact of the benefit that we have got from our Japanese or some partners. Despite that, we are expecting that our margins to be 100 basis points decline from the last year level. How are you confident of making 24%-25% kind of EBITDA margin in 4Q?
Oh, you see, we are very much confident in terms of the EBIT. Our EBIT will be negative in line with the nine months. In nine months, our EBIT negative is by 113 basis points. So, in overall annual basis, we are expecting the similar decline, 100-110 basis points.
Understood. Sir, in terms of new product launches so far, so how many products we have launched in the nine-month period?
Nine-month period, we launched one is Dinkar and Melody Duo.
And one is Barrier.
One is Barrier. Three.
Okay. So, three we have launched, right? Okay, sir. Okay. Thanks, sir. Thanks for clarifying all the questions.
Thank you. The next question is from the line of Viraj Kacharia from SiMPL. Please go ahead.
Yeah. Hi, sir. Just a couple of questions. First is on the biostimulant. Just to understand, what is the key season time for this particular product? So, the reason why I'm asking is if for any reason there's a delay in approval from the government for registration. So, if in case it doesn't come by Q1, is there still a possibility we can meet the sales, or you think a good part of the season would be lost?
The peak consumption time coincides with our peak business opportunity, which almost starts by June end, say, early July, and goes on through late November. So, mostly July to November is the peak consumption. Another round comes up in March with sugarcane.
Understood. Got it. When you say biostimulant, the total number of products which you would have in the portfolio would be four as of today?
Yes. The ones regulated in the regulated environment were four, out of which three will be coming through, and one would which is of animal origin and all that. So, that may not be coming through easily or not in the near future.
The three would be a larger part of the sales loss which we.
Yes. As the other three constituted more than 80% of our revenue, so that would be well-placed. In addition to that, you would recall we had already launched mycorrhiza four years back, and then we introduced mycorrhiza Super also a couple of years back, which is a good replacement of biostimulants as far as farmers' crop growth opportunity is concerned. And Dhanuka's Mycore Super brand has taken a good position in the market, filling up the vacuum created by the absence of biostimulants from Dhanuka's own portfolio and of the competition as well.
Understood. Second question was, sir, if you can give a mix of in terms of EBITDA of B2B versus B2C?
You see, B2B, of course, the EBITDA is significantly lower than B2C.
For the quarter gone by, what will be the EBITDA for the BH business?
Can you repeat your question?
For the quarter which is gone by, what will be the EBITDA for the BH B2B business?
The HEC EBITDA is still negative. In Q3, it is around INR 4 crore as against the INR 5 crore as against last year INR 4 crore.
Okay. Sir, this question on BH, I think last quarter, we mentioned that we are commissioning a second product for supply to domestic I think difenoconazole for supply to domestic market. And we are also having a good utilization for the first quarter. But if I look at the revenue for the quarter for the BH, it's hardly INR 4 crore as against the run rate in the earlier quarters. Generally, the environment is quite positive in terms of price and volume, both from export point of view as well of CPV exports. So, what is the reason why the sales are lower for BH?
So, Q3 in any case is off-season for both of these products. Q3, we were expecting lower sales. That is one. Second, our difenoconazole production got extended and went into November and December, which we were expecting to close in October and November. So, that got delayed slightly. But now it is completely online. Starting Q4, difenoconazole revenues will start coming in as per the plan. With respect to bifenthrin, in any case, it was off-season. Q1, we have started on a good note for bifenthrin technical sales from the Dahej. So, we are expecting that to continue in the future as well.
Okay. So, both these two products together going into next year, what kind of sales utilization we are looking at? And what is the CapEx for the MPP2 plant?
Yeah. Next year, FY 2027, we are looking at a capacity utilization of close to 80% for these two. Plus, we'll be adding one more product in this plant that is iprovalicarb. So, three products together, we are looking at 80% capacity utilization. And the MPP2, we are expecting a CapEx in the range of INR 60 crore-INR 70 crore.
Okay. Got it. Last question. Sir, if I look at the B2C, if I adjust for the sales addition from the Bayer products in the quarter which has gone by, then the degrowth for us is even higher in B2C. And if I look at the other players in the industry, we've not seen that kind of a degrowth. So, just trying to understand what is driving the low performance for us in any color you can give.
So, one is, of course, the impact of the biostimulants in B2C segments, which has hit us hard in Q2 and Q3 business opportunity. Then also, last year, we had some really powerful NPI new product introduction for chili segment. Chili has taken a major beating in this season down south. So, the consumption has been significantly low, which is a very specialized segment where farmer consumes only high-value product. And that high-value consumption has been hit hard. Third is, I think at Dhanuka, we really optimized the channel inventory significantly faster than the industry standards. So, we do not allow our channel partners to carry forward the inventory. We try and turn it around faster than what the industry averages would be. That could probably but this is an external factor, which I don't have a complete hang of, be influencing how our sales get compared.
Understood. But in terms of the receivables or inventory, would it be right to think that say, if I look at March 2025, we ended the year with around INR 230 crore-INR 240 crore of cash. And if I look at December, I think based on the commentary, we are still around INR 250 crore of cash. So, would it be right to think that we are sitting on a sizable amount of inventory or receivables compared to a normal period?
You see, in terms of March, we were having a loan to the banker to a tune of INR 50 crore, which is paid in the current financial year, right? And now, our debtor position is improved as compared to last year, December. Inventory, of course, has increased because of the, you see, impact on the volumes because there are many molecules which are imported. And we have sourced the inventory as per our sales plan, but somehow that misfired because of which our inventory of few imported molecules have increased significantly this year.
Sorry to interrupt you, sir. You may please rejoin the queue for the next question. The next question is from the line of Ketan Chawla from Affirma Capital. Please go ahead.
Thanks for the opportunity. Sir, if you look at our gross margins from FY 2023 to FY 2025, there was an expansion of approximately 580 bps. Our margins went from 34.4% to 40.2%. If you look at the backdrop, this was an environment when technical prices were benign due to oversupply and inventory issues. In one of the earlier phone calls, I believe you had referred that you were expecting 100-150 bps of contraction in gross margins because we were expecting the prices to stabilize and then thereafter increase. If you look at the gross margin for the current period, it's still at 40%. Two questions for you. Firstly, is the softness in technical raw material prices still there? And how long do we expect the softness to continue?
Second question is, once the cycle turns and prices stabilize and increase, what is our expectation of the sustainable gross margin that we can have?
So, you see, one impact of the gross margin is on account of this year we received around the NEB of INR 20 crore, INR 19.5 crore, which has no basically COGS. This is entirely impacting the gross margin to the extent. Another is with regard to the technical prices, I think the softening is almost over now. And going forward, I am of the opinion that 38% gross margin are sustainable in long term.
Okay. You're saying that now you're seeing technical prices picking up and stabilizing, and you expect about 200 basis points impact on your margins. Sustainable should be more 38% gross margins as opposed to 40-odd%, which have been there for the last year, year and a half.
Yeah. 2% impact on account of not the raw material prices. It would be on account of the NEB.
Understood. What percent of our raw material is actually sourced from China?
Direct procurement would be in the range of 10%-15%.
If you include indirect as well, then how much would that be?
Indirect is difficult to say because we buy a lot of material from Indian companies who are both manufacturers and importers. So, it is difficult to say what would be the indirect procurement from China.
Got it. Thank you, sir. I'll come back in the question queue.
Thank you. A reminder to all participants, you may press star and one to ask a question. The next question is from the line of Parth Mehta from Vallum Capital. Please go ahead.
Hi, sir. Thank you for taking my question. Just wanted to know for the quarter, what would have been the contribution from the volume and price?
You see, in this quarter, it's almost flat. Similar. Value and volume are almost similar.
Okay. Okay. So, equal contribution from volume and value, right? Volume and price.
Yeah. Yeah. That's right.
Understood. Just wanted to ask, in the previous quarter, you had given a guidance cut and guided the full year to be ending with a flattish growth. Would this still be achievable, or do you think there could be some growth in Q4 given that Q4 has a good start?
Yeah. In case of Q4, definitely, there would be a growth. But on a yearly basis, we are of the opinion this should be flattish here.
Okay. Got it. And just one on the guidance of the two Bayer products, the guidance for the full year was around INR 40 crore. So, is that achievable? Will it be ending at INR 40 crore?
No, no, no. Because the grape season not behaved as per our expectation, so it would not be INR 40 crore. It would be significantly lower than INR 40 crore. Maybe around INR 30 crore.
Okay. Thank you.
Thank you. The next question is from the line of Archit Joshi from Nuvama. Please go ahead.
Hi. Good evening, sir, and thanks for the opportunity. I just have one question. Sir, what would you make out of the current draft pesticide management bill proposed by the government? And what would the long-term impacts be for organized players like us at Dhanuka Agritech? So, your thoughts. Thank you.
Right. So, draft pesticide management bill would be really good for the organized industry and organized players. Dhanuka being an organized player and believing in building brand equity, building value for the customer, in this case, our farmer, would significantly stand to benefit from the PMB. PMB, apart from various other things, brings in tough rules around misbranding, fake, spurious products. It brings stiff punitive measures around fly-by-night operators, which will be a big deterrent and will open up more market space for organized players like ourselves. PMB, I think so, is long awaited. The government has asked for various inputs from all possible stakeholders, including farmer. We, as the industry and industry associations, have submitted our viewpoints, contributed for the same by 4th of February that was to be achieved.
We have provided our views where the government and the industry together can facilitate the desired growth of the Indian agriculture and prosperity of the Indian farmer.
Sure, sir. Sir, upon its execution and obviously, after taking the comments from all the stakeholders in the industry, would you have any expectations or have an understanding on how the government will try to maintain checks and balances about the most talked-of problem with respect to spurious products and the misbranding that you spoke of? Would you have any comments on that account which might help us, or rather as an organized industry, to gain more market share from the ones who are doing the malpractices?
Agriculture is a state subject, and to an extent, the regulatory and the executive powers is also with the state, which is certainly not going to change with the law. Yet, the provisions will make it difficult for the hand-in-glove operators with the fly-by-night operators. There are other agencies who could be hand-in-glove with these. It will become difficult for them to really play around. Yet, the success of any law depends on how well it gets executed, where the center and the states will have to collaborate to ensure that the execution is in the spirit of the letter. That is something that is something at Nuvama yourself and at Dhanuka and the entire industry would look forward to, that the execution is in the spirit with which the law is framed.
Sure, sir. Understood. We'll definitely hope for the best. Thank you, sir. That's it from me. Thank you. All the best. Thank you.
Thank you. The next question is from the line of Rohit Nagraj from 360 ONE Capital. Please go ahead.
Opportunity. Sir, in terms of new product introductions for next year, FY 2027, how are we placed and what could be the 93-94 products for what categories that we are looking at? Thank you.
Yeah. So, we have lined up three new launches for next year, out of which two would be fungicides, and both of them would be 93 first-time introductions. And then we have also lined up a specialty offering for enhancing spray efficiency. So, these are the three products which we have lined up for introduction over next year.
From an application perspective, which crops these would be utilized primarily for?
Right. So, both the fungicides will find their application significantly in grapes and then in potato. They will also find application in tomato and chili. So, grapes, tomato, chili, all three being high-value crops will have a good opportunity. And the third spray enhancer also, as a premium product, will be positioning largely in tomato markets.
Sure. So, second question, in terms of the current environment, I mean, as of now, there are talks that there will be probably El Niño this year. Historically, since we've been through several cycles, whenever the El Niño has happened, has it impacted materially in terms of the performance for a particular kharif season? And alike question to that, we have also experienced the farm income being lower, getting impacted by Q3 numbers. If it continues to remain low, will it have its repercussion for the next kharif season? Just your thoughts on this. Thank you.
Right. So, first a take on El Niño. The El Niño predictions which have come up recently are followed up by these being too early and the margin of error being significantly higher. So, the new predictions normally come in after mid-April. We'll be waiting for that to really understand how intense El Niño forecast is. Yet, you would have also noticed that all El Niño years are not poor rainfall years. So, that being said, we'll have to wait for IMD, Australian Meteorological Department, and a few other meteorological departments for us to kind of collate and understand how do we see the upcoming Kharif. Talking about the farm income, so it is the farm income which not only Dhanuka Agritech, but almost the entire nation depends upon agriculture contributing 14% of the GDP and more than 50% of the population being dependent on agriculture.
Not only agri-inputs, but FMCG, FMCD, automobile industry depends on their success. So, yes, we not only keep our fingers crossed. We genuinely pray, and at Dhanuka, we work closely with the farmer so that we can support in enhancing their income.
Got that. Sir, just one last clarification. In terms of our Dahej manufacturing block, are there any talks going on with any of the multinational players or players outside India for an exclusive contract or arrangement which we have been seeking for a fairly long time? Thank you.
Yeah. There is one discussion which is going on. In the last quarter, two companies have visited us at Dahej. So, one Japanese and one European. So, we are looking forward to progressing on these discussions further.
Sure. That is helpful. Thanks a lot, and all the best, sir.
Thank you. The next question is from the line of Rajat Setiya from iThought PMS . Please go ahead.
Hi. Thanks for the opportunity. Sir, just one question. The amount of sales return in this quarter?
Yeah. Sales return in this quarter is similar to last year in Q3.
Yeah, sir. What is the number? I was not able to find the number for last year.
This year is INR 72 crore, as against INR 74 crore last year.
Right. So, INR 72 crore in this quarter, right?
Yeah. In this quarter. That's right.
The nine-month number would then be closer to INR 220 crore, correct?
Yeah. That's right.
Okay. All right. Thank you.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. Should you have a follow-up question, we would request you to rejoin the queue. The next question is from the line of Amit Khetan from Laburnum Capital. Please go ahead.
Hi, sir. Thank you for the opportunity. If you were to take a slightly medium to longer-term view.
Sorry to interrupt you, sir. We are unable to hear you. Please use your handset. Sir, are you able to hear me?
Yeah. I can hear you. Hello?
Yes, sir. Yes, sir. Please go ahead.
Yeah. Hi. Thank you for the opportunity. If we take a slightly longer-term view of, say, three to five years, what is the kind of growth opportunity for Dhanuka? What sort of growth rate can we realistically grow at? And it will be helpful if you can break that down into growth from existing products as well as new molecules and exports as well as getting into new crops.
Right. So, this is a very larger question, but let us look at the macroeconomics favoring the agriculture.
Yeah.
I see an echo in my voice. So, there is a sound system over there which is causing this echo.
Okay. Let me just mute it from my side.
Yeah. I hope so. There is no more echo. So, the macroeconomic factors certainly favor agriculture, and so does the agri-input industry also. While urea, DAP, and other nutritional segments are what farmers invest in eagerly, the crop production industry has taken up a strong position with investments in the agriculture increasing and value-added crops gaining significant ground in the agriculture space. Within that domain, Dhanuka has constantly brought in new products, value-added products, specialty products, and niche products from our Japanese, European, and U.S.-based partners, thereby offering to the farmer specialized solutions for their problem. So, with this, we have a place in specialized crops like grapes, tomato, chili, some of them getting exported as well, while we also have a strong foothold in conventional crops like rice, paddy, soybean, cotton, and tea.
So, overall, with this kind of favorable macroeconomic situation, I believe we will continue to grow at Dhanuka with a healthy double-digit growth on a short-to-mid-term horizon of the next three to five years. The expansion opportunity is available due to multiple crop cycles. The farmer is trying to grow more than two crops now, which is almost three crops in many patches of the country, which is possible, A, because of the irrigation facility, and B, because of the increase in marketability of the produce. India, with more than 600 g per hectare agrochemical consumption, is still one of the lowest as compared to the world average agrochemical consumption, with a significantly high arable land of 150 million hectares. So, the growth opportunity is only northwards.
It really depends upon how intensely we are able to reach to every nook and corner, every plot and field where the farmer is cultivating.
Understood. And if I could, what do you see the risks aside from, say, weather patterns? What are the risks that could prevent you from achieving this double-digit growth?
Apart from the weather pattern, what matters? Could you put that on mute again? I think so. That should work. So, apart from the weather patterns, the commodity prices, and sometimes the policies like G RAM-G now could also have an impact on how the farmer moves towards agri-input. A lot also depends upon the marketability, storage, and transportation of the commodity. Earlier, India touched a milestone of almost 335 million metric tons of food grain production. And very soon, horticulture production crossed that level and touched 340 million metric tons. Now, horticulture production is a value-added production for the farmer and relatively higher on input consumption: increase in warehousing, increase in cold storage, increase in cold transportation, good roads, non-stoppage at Chungi Nakas because of the tax smoothening. All these will actually only facilitate the progress of agriculture as well as the agri-input industry.
These infrastructural tailwinds being favorable, I think so. Other than seasonal vagaries, nothing should stop.
Thank you, sir. May we request that you return to the question queue for follow-up questions as there are several participants waiting for their turn. The next question is from the line of Ketan Chawla from Affirma Capital. Please go ahead.
Thank you, sir. I had started clarification on my gross margin question earlier. So, what is the total quantum of the net economic benefit that we've received, which will now go away once we have it on our books? And secondly, what is the gross margin profile of these two brands which we had acquired from Bayer?
So, you see net economic benefit quantum in the nine-month is INR 19.5 crore, and in Q3 is around INR 6 crore.
Okay. And what is the gross margin profile on these two brands?
Gross margin is in the range of our overall gross margin.
Okay. So, broadly in line with 40-odd %.
Yeah. Absolutely. Some 200, 300 basis points here and there.
Understood. Thank you, sir.
Thank you. The next question is from the line of Viraj Kacharia from SiMPL. Please go ahead.
Yeah. I have just two questions on the Bayer products. One is, if one has to understand the contribution margins of the two products, would it be in line with our B2C business margin, or would it be even higher? Any color you can give, both contribution and operating margin?
It is in line with the overall gross margin of the company.
Okay. Got it. Second question is, see, these two products, they have a well-established distribution system, right? So, in terms of our approach, I think somewhere in the call, you talked about us looking to appoint a new set of distributors. Are they for the new markets, or are those for existing regions as well? Any color you can give how we are approaching in terms of go-to market and any risks you see in terms of execution?
Currently, in most of the countries, Bayer has been selling the product through its distribution network, as Bayer is present directly in most of the countries. Dhanuka is not planning to go direct distribution in these countries. We are appointing one national distributor in the various markets. The new distributor appointment, which I referred to earlier, was in the countries where Dhanuka is not present. In case of India and Nepal, we are not appointing any new distribution channel.
Right. But going into 2027, do you see any risk in terms of execution since the products are being transitioned from Bayer to Dhanuka, so?
The risk is, in any business transaction, it is there in terms of the setback in terms of supply chain because, for supply chain, we are still dependent on Bayer to provide the product. And while the regulatory changes happen, with registration ownership being transferred from Bayer to Dhanuka and India's sourcing getting added, we may see some issues in supply chain, although we have done the planning, but it is always a risk.
Got it. And just last question, if I can squeeze in. See, Bayer, most of the manufacturing is centered in Europe, and the cost of manufacturing is quite elevated compared to Chinese. So, in that sense, when we look to move one of the products from Germany to India, do you see any material change in the margin structure for the product or any color you can give?
Yeah. Definitely, there would be an improvement in the margin structure for the products once the manufacturing moves to India. Absolutely.
Thank you very much.
Thank you. Ladies and gentlemen, we take that as the last question for today. I now hand the conference over to management for closing comments.
Thank you, friends. Once again, I would like to thank all the investors and analysts for your support and confidence in Dhanuka. We have already initiated our FY 2027 planning and looking forward to a normal year. I reassure our stakeholders that we are committed to the task of transforming the landscape of agriculture and farmers in India. I once again reassure the stakeholders that the bad phase for the last two quarters is over now, and now we have to look for a bright future only. Thank you. [Foreign language] . Thank you, and looking forward to connecting with you in the next quarter. Thank you once again.
On behalf of Antique Stock Broking Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.